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Trade Arabia: Oil industry ‘faces reliability crisis’

Istanbul : Wed, 27 Jun 2007   

The problem oil firms face in satisfying world demand is not a lack of supplies.

It is more due to their lack of ability to unlock new production and distribute it to consumers reliably, an oil industry conference heard.

‘There is a lot of oil and gas out there, but the time of easy oil has peaked,’ Ann Pickard, regional executive vice-president of Royal Dutch Shell for Africa said.

She said the industry would need to spend more in developing new fields, such as Canada’s oil sands, to meet red hot demand.

While oil consumers have been calling on suppliers including the Organisation of the Petroleum Exporting Countries (OPEC) to boost output, OPEC argues that the problem is not supply but bottlenecks in refining crude oil into fuels.

OPEC, which supplies a third of the world’s oil, told the Istanbul conference it was reluctant to spend billions of dollars on boosting supply capacity when global stockpiles were already high.

‘We cannot afford to invest heavily in new capacities only to find the newly developed oilfields and service facilities are idle because of a lack of demand,’ said OPEC President Mohammed al-Hamli.

OPEC, which pledged last year to cut 1.7 million barrels per day of production, has blamed high oil prices of around $70 a barrel on geopolitical tensions and U.S. refinery bottlenecks.

Companies have also second guessed their investments due to labour shortages, record high commodity prices and the technical difficulties in obtaining new oil and natural gas supplies.

‘Global energy security is endangered by the failure to undertake vital investments in the production and transmission infrastructure of energy producing countries in a timely manner,’ Turkey’s President Ahmet Necdet Sezer.

‘The problem is not that there isn’t enough gas. The problem is where is it going to come from,’ said Stefan Judisch, chief executive officer of RWE Gas Midstream.

European leaders expressed concern that much of Europe’s natural gas comes from Russian gas monopoly Gazprom.

‘We should not have a monopoly of any sort in supply or distribution,’ said Georgia President Mikhail Saakashvili.

Several European countries and Turkey have launched the Nabucco project, a natural gas pipeline that links fields from Iran, Iraq and the Caspian to Europe, to reduce their reliance on Moscow.

The US, which accuses Tehran of developing a covert nuclear programme, has repeatedly opposed any Iranian involvement in the project.

Industry experts, however, believe Iran’s vast natural gas reserves are essential to making the pipeline a success.

‘When you want to diversify vis-a-vis Russia, you cannot rely on the small reserves. You have to go to the biggest reserves,’ said Seyed Mohammad Hossein Adeli, head of Iran-based Ravand Institute for Economic and International Studies.

Iran sits atop the world’s second-largest gas reserves after Russia. But sanctions, politics and construction delays have slowed its gas development and analysts say it is unlikely to become a major exporter for a decade. Reuters and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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